Trusts are not only for the rich. Anyone with minor children (and even children in their 20’s) should consider a trust for their family.
If any property passes to a child under your will, from a bank account "payable on death" or otherwise, the child will generally get all of that money at age 18. The same holds true if you have named a child under a life insurance policy, IRA or other retirement account. Even if money is held in a Uniform Gift to Minors Account, the child gets everything at age 18.
Some people are very responsible and financially sophisticated at that age. But let’s face it — many are not. A lot of teenagers and twenty-somethings would rather party than manage their investment portfolio.
Many parents do not think about how much their children could inherit at age 18. While most Americans are strapped for cash and living paycheck to paycheck, the value of their estates (including house, life insurance, retirement accounts, etc.) could be substantial.
By creating a trust, funds can be held by a trustee and used to pay education, housing and other expenses. Any remaining balance can be distributed at a later age.
While I deal with many more complex asset protection vehicles, a fairly simple family trust arrangement can prove to be a huge benefit. It can greatly increase the odds that your hard-earned money will not be wasted away in the event of your death.